Is a vehicle from a Financial Lease contract on your balance sheet (On-balance or off-balance)?

Is a vehicle from a Financial Lease contract on your balance sheet?

No, with a Financial Lease construction, the leased vehicle is not on your balance sheet. The vehicle remains the legal property of the leasing company for the duration of the lease contract. This means that you do not have to record any assets or property on your company balance sheet.

This has a number of advantages for you as a business owner. Because the vehicle is not on your balance sheet, you cannot use depreciation and any tax benefits associated with assets. On the other hand, you can deduct the cost of leasing from your turnover, which can be favourable for your tax return.

The fact that a leased vehicle is not on your balance sheet does not affect your financial ratios or credit space. This preserves your flexibility to take out future financing.

Exception:A car can be capitalised on the balance sheet in a Financial Lease construction, called On-balance financing. With Financial Lease, you become the direct economic owner of the car. This allows an entrepreneur to take advantage of the tax benefits of a Financial Lease construction.

Do you have more questions about Financial Lease or would you like to discuss the possibilities? Feel free to contact us, and our team is ready to help you.